There is often a lot of discussion about the impact of advertising and marketing schemes on the number and nature of offers on homes on the market. We’ve heard a lot in the last few weeks about how houses are “scarce” and buyers can’t find a house. This seems counter intuitive if house prices are still low and the housing market is still struggling to recover. Often time’s home sellers are sure that if they just change agents or if their agent would just run a bigger ad in the local newspaper or the Walls Street Journal that special someone will come and fall in love with their home – but they don’t, why not?
The work of a listing agent is critical in selling a home but it’s not because of the size or type of ads the agent runs or home many Open Houses the agent does that creates value – almost none of that matters. I have closely tracked lead calls into my office since October 2005 and most of the big real estate franchises have done the same, as has the National Association of REALTORS, and the overwhelming evidence is that buyers look for homes online. If they didn’t, Zillow and Trulia, (bad information that they contain and all), wouldn’t even exist. Good listing agents tell their clients, the Sellers, the truth and help them deal with the home selling market as it is, not as it was or they’d like it to be. Good listing agents help their clients understand that the tax assessment from four years ago is not what the house is worth now and probably never was what it was worth. (It is not unusual in my experience as a REALTOR in New Hampshire to find properties over assessed by as much as 40%. I can sight examples where properties sold for 20% of assessment.) The biggest single problem in determining an accurate market price for a home is Listing Agents not providing accurate information and not working with the home sellers to understand the competitive problems with selling a home. So when the Home Seller guesses about their home’s market value, consider the three biggest factors affecting values in a home based on current consumer preferences and lender requirements. (I had a woman today tell me she couldn’t put her house on the market because in 2005 one neighbor sold their house for 25% more than current conditions suggests, and in 2008 another neighbor sold their house for 50% more than current market conditions indicate.)
Current market conditions and demand are heavily impacted by the three biggest problems for Home Sellers in today’s real estate business: Listing Agents that share this information have good experience helping their clients and their clients understand what they are up against even if they don’t like it. The three issues for Home Sellers are: Functional Obsolescence, Economic Obsolescence and Deferred Maintenance – at the end of my article I have included examples of all three.
In the end the accuracy and success of any marketing plan depends on the agent and client allowing the reality of the situation to govern the transaction and get the listing price as accurate as possible – “denial is not just a river in Africa.”
Functional Obsolescence
Ceiling Heights <60”
Walk-through bedrooms
Bedroom without closet
Knob & tube wiring
Fuses or Pushmatic CB
Less than 100AMP Service
Un-lined chimney
No washer & dryer hook up
Incomplete bathrooms
No heat on second floor
Two appliances on one flue
Incomplete insulation
Kitchen cabinets incomplete
Dirt floor in cellar
No bathroom on 2nd floor
Single Pane Windows
Old Linoleum
Economic Obsolescence
Store with apartment over
House with business
Business in residential area
Single family in business
Single family with small Apt
Mobile Home built <1977
Structure on Private Road
Lead Paint – Anywhere
Structure on Class VI road
Any non-conforming use
Only wood or coal heat
No insulation
Kitchen without cabinets
No Cellar or Crawl Space
Out House
Underground Tanks
Subfloors exposed
Deferred Maintenance
Roof shingles deteriorating
Peeling exterior paint
Leaking pipes
Broken windows
Wet basement
Chimney in need of pointing
Rotten sills
Sagging floors
Non-conforming septic
Heating system problems
Broken/inoperable doors
Exposed insulation
Broken kitchen cabinets
Sump pump or drains broken
Holes in walls & ceiling
Broken or missing screens
Damaged carpet & floors
By Dick Thackston
buyer, home values, Housing, Listing agents, market data, Obsolescence, real estate, Real estate news, realtor, seller, selling
Real Estate tradition, in this part of the country says that “…there’s no point in having your house on the market in the winter between Thanksgiving and the Super Bowl…” I’ve always thought this was a silly myth and have always advised my clients – both buyers and sellers of the fallacy of this thinking. I started my real estate career on December 12th, 1982. I was offered a position with a new home builder in Glen BurnieMaryland in the winter when a really good interest rate on a home mortgage was around 13%. I’m pretty sure the real reason I was hired was not any great expectations about me doing a bang up job but, because I was “dumb enough” to take the job in mid-winter with minimal commitment from the builder, and the regular staff was all going on a company paid tour of Mexico. Being a recent college graduate and not being familiar with all the “Facts of life”, as known by the real estate industry, I did not know that no one was supposed to be out buying houses in December of 1982. I sold twelve homes that month – who knew!
They kept me on when they came back.
Anyway enough about me, here’s the point. The winter can be a truly breath taking good time for residential real estate. The transactions are typically quick, clean and fast.
Top Reason # 1 for doing real estate in the winter: Residential real estate can be a bit like driving down a turnpike for buyers, sellers and agents, because as there are more people on the road traffic tends to slow down and small bottlenecks become more pronounced. When the highway is very crowded many people make mistakes or get frustrated and everyone on the road suffers. So to buy real estate in the winter buyers have a slightly more limited pool of inventory to pick from but they have a much better pool of inventory. Typically the sellers who have their homes on the market in the winter are serious sellers, they are not putting their home on the market to “try things out and see what happens” they want or need to sell and are generally more prepared to handle issues reasonably.
Top Reason # 2 for doing real estate in the winter: Good properties just don’t sit around as long. Think of it this way: if a buyer has been thinking about looking for a home and has been scanning the web for months or has been out looking or a home with an agent or even made some offers that fell through due to any number of reasons, when a good property comes on the market these folks can see it and generally will snap it up. There’s an old saying in retail sales: an educated consumer is the best customer. These real estate consumers are self educated and well educated. Buyers at this time of year can pick out a deal and don’t wait.
Top Reason # 3 for doing real estate in the winter: There’s simply less competition. Look back at reason # 1: would you rather drive down a crowded highway in rush hour or a busy highway on a sunny day. The psychic effect of having a well negotiated clear transaction with less pressure is huge. Many times it takes home buyers and sellers years to recover emotionally from a messed up transaction. Yes there are the Holidays but you’ll also have an open road.
Remember it’s still a home, it’s not really supposed to be just an investment. You aren’t going to steal a house if you’re a buyer and you aren’t going to be the only game in town if you’re a seller – ultimately both buyers and sellers can and do wait if they don’t get what they feel is fair. All the regular rules apply to transactions, but residential real estate in the “Off Season” can be very worthwhile.
Technology is likely to have a significant impact on the structure of the real estate industry in the coming recovery for a number of reasons. Real estate transactions have basically two related and separate parts the seller side and the buyer side.
The Buyer Side will not be as greatly impacted by change as the seller side due to some factors which are basic to the process. The impact of technology on the buyer’s side will primarily be on the media not on agents and buyers. Most people who have been involved with the real estate industry over the last ten or fifteen years have known that print advertising has declined in efficacy dramatically. Virtually all buyers begin and continue their home searches on line. Broker and real estate franchise that have been tracking the source of their business for many years have seen that buyer leads that came primarily from print advertising before the internet have seen the number of viable leads from print advertising drop to a very small number of viable buyer leads. The last and most effective use of print advertising has become open house events or very short term immediate demand sort of inventory like rentals. Buyers still however require the assistance of a licensed real estate agent to help them work their way through a real estate transaction and access and view properties as well as negotiate and consummate a real estate transaction. Fees for trained and competent Buyers Agents are likely to remain in the 2.5% to 3.5% of the transaction price that they have been in for many years due to the high time consumption and relatively high failure rate that Buyer Sides of transactions experience.
The Seller’s Side of real estate is likely to see the greatest changes. For a decade or more before the Great Recession large banks had been trying to repeal laws that barred them from providing real estate services such as listing and selling homes for their customers. Now as a result of the unprecedented number of foreclosures in the hands of banks they have become The Dominant Sellers of real estate in theUnited States. Fanne Mae and Freddie Mac established 6% as the official normal commission that they would accept on both short sales and foreclosures and required that commissions be spit equally between buyer’s side and seller’s side in a real estate transaction. Every real estate agent in the United States has been trained that establishment of “Normal” or “Set Fees” has an anti Trust violation since the late 1970’s however the big banks and Fanne Mae and Freddie Mac have been seen as exempt from these laws. This has resulted in a situation where the majority of listings that sell are listed by Bank/Lenders that own them at a nominal rate of 6% with local real estate agents and agencies but using a conduit of third party companies that collect hefty referral fees on their listings leaving the selling agencies to work with 1.5% to 2% of the actual sales price rather than the 3% to 4% that they have historically have had to work with since the end of World War II. These agents and agencies have been able to do this because of the downward changes in their cost structure do to the changes in technology.
It is unlikely that as non-institutional home sellers are able to re-enter the home selling market as prices stabilize and even rise in the foreseeable future that the advantage to both consumers and Realtors of lower fees on the listings side of real estate transactions will be lost, that have been made possible by the reduced operating costs possible for Realtors due to the changes in technology.
By Dick Thackston CRB, ABR, ABRM, Broker NH, MA & VT
buyer, buying, deal, home sales, off season, real estate, residential real estate, seller, selling, Winter
I see America changing every day when I talk to home buyers. American’s expectations about housing are switching rapidly from the “American Dream” of Mom, Dad, kids and a house in the suburbs, not as much because of the financial decay of the last three years, but rather because the current generation of Home Buyers, the so called “GenY”, has moved away from the highly conformist expectations of their grandparents – the “Baby Boomers” – to a highly diverse, multicultural, multidimensional society.
The Baby Boomers experience, viewed as a cultural event or milestone, has had more impact on American society, real estate and home ownership than any other event in American society since the Civil War. Boomers were raised with these expectations and typically only owned three or four homes in their lives – this is the generation that had mortgage burning parties when they paid off their homes and built a pool.
The Gen X’ers, the children and grandchildren of the Baby Boomers, never fully adopted the lifestyle of their elders. This is the generation that came of age in the boom years of the 80’s and 90’s. This generation used credit cards, car loans and mortgages like no generation before. This is the generation the treated their homes as Piggy Banks and expecting to buy low and sell high on every home they would ever own and they expected to own a lot of them too! Gen X’ers as a group expected to stay in multiple homes for short periods – three to four years max – disposable lifestyles. Their generation is much smaller then the “Baby Boomers” as a group but has had a disproportionate impact on the housing market. While these Gen X’ers have had an immediate short term negative effect on housing and the American Economy as a whole, the effect on real estate will be short term because this is a small generation. The dramatically different “Generation Y”, aka “The Microwave Generation”, influence is already being felt on the real estate market and the economy as a whole.
“Generation Y” is much larger than the Gen X’ers and has a completely different agenda. Financially, socially and educationally, Gen Y is dramatically different than either of the two prior generations of Americans. Gen Y is much more likely to have an IRA or a 401K than either of the earlier generations and at a much earlier stage in life: Baby Boomers expected a pension, Social Security and the equity in their home to carry them through retirement; the Gen X’ers expected to flip houses to infinity and beyond with minimal reserves and limited funding of retirement accounts.
“Generation Y’s” effect on housing will be as dramatic as that of the post World War II baby Boomers or greater. The Y’s are happy to not own a home any time soon if at all. It’s more important to the Y’s to have flexibility and cash. This is a generation that has student loans like no other before but that’s because as a group they view education not as just as important but imperative to their lives. Lifestyle choices such as access to services, an elegant downtown – clubs and shopping – is more important than owning a home. Y’s as a group are looking for housing that meets those criterion rather than a quarter acre lot and a three bedroom house.
Sure, Generation Y’s expect to own homes, but it is not an urgent first order of business as it was for their parent and grandparents. Generation Y’s perspective on real estate ownership is colored by their willingness to rent. (Sixty plus per cent of renters want to own their own home someday according to a recent survey by PulteCorp.) The Y’s interest in savings is reflected in the much higher contribution rates to IRA’s and 401K’s than either of the prior generations combined with their much higher student loans and need for “a lifestyle” that is more cosmopolitan and focused on convenience than the Generations of “Boomers” and “X’s” that came before them.
By Dick Thackston CRB, ABR, ABRM
Broker NH, MA & VT
401K, american dream, American Economy, american society, baby boomer, buying, Civil war, disposable lifestyle, economic crisis, Economics, flipping, foreclosure, generation x, generation y, home buyer, home ownership, Housing, housing market, lifestyle, microwave generation, Mortgage, renovations, Retirement, savings, selling, social security, suburbs, world war II
By Dick Thackston
2012 is likely to be defined, in the real estate world, by three “E’s”: Expectations, Employment and Europe/Economy. No matter what your political belief system is, no matter how much or how little money you have, these three factors will permeate American life and the economy more than any others in the next eleven and a half months.
Expectations: In the world of sales there is an old truism, “To live with the classes sell to the masses!” those will be the watch words for real estate this year. 2012’s real estate will almost certainly only be about first time buyers and large volumes of REO properties being sold to investors. Both first time buyers and investors have some striking similarities: both groups feel they are buying at the bottom of the market and both groups have an expectation of housing prices increasing over the next three to five years and both groups have an expectation of rents remaining and going higher. (Personally, I agree with both groups.) First time buyers not only have the family formation/nesting instinct driving them into purchasing, but they have the ever increasing cost of renting versus home ownership. Most first time home buyers are renters now and are looking at homes that will have monthly mortgage payments 15-20% below their current rent. Landlords/Investors are looking at the exact same equation from the other side and seeing that almost anything they buy now will have positive cash flow of at least 10% and often up to 20%. The group that is melting away at this time is the investors looking to buy, fix and flip, the risks are too great of carrying a vacant property or over improving and taking a hit in what is in fact a flat market, and of course move-up buyer’s remain effectively locked out of the market for the foreseeable future. Until move up buyers can sell and move there is likely to be no updraft in the real estate market, but when it does begin it will be huge.
Employment: In New Hampshirefor sure, the Northeast in general and for the nation probably, employment getting better.New Hampshire has experienced job creation. Not dramatic but some. GivenNew Hampshire’s favorable tax and business environment it’s not really surprising that it would be one of the first parts of the country to recover. New England more generally seems to be getting better although not at the same rate as New Hampshireand the nation, well let’s face it would be hard to screw things up much more – which is a perverse kind of improvement actually. So as workers become more secure in their outlook on employment, they become more confident that they can cope with a mortgage payment and the other cost associated with home ownership, and are feeling much better about leaving their apartments and Mom’s basement. This is having a very noticeable effect on stabilizing the market at the bottom.
Economy: The macro-economic environment remains dicey. I almost headed this section “Europe” as my third “E” but really it’s bigger than all that. The United Sates is no longer insulated from the rest of the world economically. I doubt that this was ever really true, but we felt it was true and we certainly acted as if it was true. The United States remains the world’s largest economy however it remains subject to outside shocks: Tsunami & nuclear disaster in Japan, economic slowdown in China and most dramatically European debit crisis – country by country bad news out of Europe send shocks through our financial system and impacts our banking sector. The largest of these in public perception is Europe which is unlikely to be resolved anytime soon and will continue to drag on the world economy. China seems to have better managed its financial affairs – easier in a totalitarian state – and seems likely to have a softer economic landing than Europe.
What’s the take away from all this? Housing is stabilizing now; sales volume is likely to increase significantly; good deals from a buyer’s perspective are likely to remain the norm for the next eight to twelve months; no real appreciation in real estate as an asset class is likely and value added efforts for renovations will remain high risk till after the end of 2012.
buyer, buying, China, debt crisis, economy., Employment, Europe, Expectations, Financial, financing, First Home Buyers, first time buyer, first time buyers, first time home buyers, foreclosure, housing market, housing market recovery, housing recovery, investors, Japan, Keene, landlord, Landlords, Massachusetts, monadnock region, move up buyer, New Hampshire, northeast, Peterborough, political belief system, positive cash flow, real estate, realtor, REALTORs, recovery, REO, Sales volume, seller, selling, short sale, time home buyers, totalitarian, Tsunami, Unemployment, Vermont
By Dick Thackston CRB, ABRM, ABR
Since the down turn started in the third quarter of 2005, (yes that’s right it’s actually been over six years if your benchmark is real estate brokerage), and the economic seizures started happening almost daily after November 2008, I’ve actually had some excellent experiences helping sellers and lenders work out a short sale.
Initially mortgage lenders were less likely to work out a short sale for a number of reasons: they didn’t believe the property was upside down, mortgage insurance would cover their losses if it went to foreclosure and/or they were simply too overwhelmed with the volume of business collapse that they couldn’t function efficiently and make decisions.
In 2007 I began the process of helping people work out a Short Sales on their homes if they were over mortgaged. One of the most successful short sales I’ve done was a house inKeene,New Hampshire. The owner had purchased the home about twenty years before he called me. He had tried selling the home himself and tried a Virtual Real Estate brokerage from outside the area with no local support. All the time he tried this, his home was sinking in value.
Why, one might wonder, if he had owned this home for over twenty years would he owe more than he paid? Well, actually what he had done was borrow money incrementally over the years to put his children through collage and purchase each of them cars when they graduated. He literally used his home as a savings account.
The biggest hurdle in the transaction was the owner, he just couldn’t believe that his home would be worth the loan balances plus and additional ten thousand dollars so that he could start his life over again someplace else. Once I was able to get him to understand that the value just wasn’t there, and he agreed to price the house to the market comparable prices in his neighborhood at the time, we got some OK sales traffic and ultimately an offer. I presented the offer to both the owner and his lender. I obtained the owners detailed financial information and the bank agreed to accept the short sale. Little or no emotion, very rational, and very efficient successful transaction.
The entire transaction from day of listing to day of closing the short sale, including negotiating with lender, was about five months or one hundred fifty days to closing.
Bellows Falls, buyer, Dick Thackston, Financial, First Home Buyers, first time buyer, foreclosure, Keene, lender, Massachusetts, Mortgage, negotiation, New Hampshire, over mortgaged, Peterborough, real estate transaction, realtor, seller, selling, short sale, transaction., Vermont, Winchester
By Dick Thackston
Distressed properties are the biggest part of the real estate business today. Of the distressed properties that are on the market and selling now the majority are not bank owned REO properties rather the majority of distressed properties on the market and selling today are “Short Sales”. Short sales are properties where the home owner owes more than the current market value of the home and is attempting to sell the property and have the bank write down the loan balance on the home.
Generally, Short Sales properties are in better condition and are still financeable with normal condition than properties that have gone to foreclosure because the home owner still lives in the home and maintains it as their own. These seller’s generally are looking to maintain their credit and are just people caught in the trap created by a declining real estate market over the last five years and have to move on for one reason or another.
National data services show that 12% of all homes that closed nationwide in the second quarter of 2011 were short sales; that’s up from 10% from 10% for the same period in 2010! Effectively a 20% increase.
The reason for the increase appear to be multifold: it appears that more home owners have come to accept that their home will not increase in value without improvements in the property or the economy that are outside their ability or control and their reason’s for needing to move generally revolve around job and/or family changes as well as just a plan old need to move on.
Another major factor in this phenomenon has been banks & lenders that hold mortgages. Banks & lenders have come around 180 degrees from where they were five years ago. Five years ago very few banks & lenders would even consider a short sale, they like most home owners expected prices to maintain or recoup in a few months, but today they have come to realize increasingly that it is in their best interest to work with troubled home owners to resolve mortgages where the homeowner is upside down on the loan. To be sure this has resulted from pressure from the government in Washington as much as from market forces but overall it is good news and likely to pave the way to a more stable and prosperous housing market in the future but getting the dead weight of over mortgaged homes through the system. As an example Bank of America has announced that it expects to complete around 100,000 short sales in 2011!
The key to a successful short sale experience is consistently an agent who has the background and experience to complete a short sale it is not an easy process even now. It generates many times the paperwork and problems of any other sale. The team at R.H. Thackston & Company has been completing short sales since the Savings & Loan crisis of the early 1990’s and has the experience and knowledge to serve you in managing a distressed property sale. Since the beginning of 2011 we have completed on average 3.5 distressed property sales every month.
buyer, Dick Thackston, financial institutions, financing, first time buyer, foreclosure, housing market, Keene, lenders, Massachusetts, New Hampshire, News, Peterborough, real estate, REALTORs, REO, Savings and Loan, selling, short sale
By Matt Polsky
Mortgage Commentator and Our Guest Blogger from VAMortgagecenter.com
Using a VA Home Loan to Purchase Your Vermont Home
Vermont is home to lush landscapes and excellent communities, making it a long-standing residential hot spot for outdoor enthusiasts. New England is also home to numerous military bases and many military members. Family of service members have also been drawn to Vermont as it provides them the peace and quiet they desire, which other more populous New England states may not afford, while still offering all modern conveniences of the region. For military members wishing to move to Vermont, they should consider using the VA Home Loan program to finance their purchase.
Why Choose a VA Home Loan?
VA home loans specifically cater to the needs of military members, more so than any conventional lending program. In 1944, the VA home loan program was established to meet the needs of military members, and does so by offering unique, money-saving benefits not found in other conventional home lending programs.
With a VA home loan, eligible borrowers can expect to benefit from competitive interest rates and flexible mortgage terms, in addition to other benefits, including:
In addition to the above listed benefits, the VA home loan program also has higher loan limits than other lending programs in its class. Although often overlooked, this is highly beneficial to military members interested in purchasing a home in Vermont, where home prices can average up to $400,000 in certain areas.
The Quick and Easy VA Loan Process
Obtaining a VA loan is a quick and hassle free process that begins with a simple call to a VA Loan Specialist. After the initial phone call, eligible borrowers can expect to purchase a home in five easy steps. Although the process may vary for certain borrowers, the VA loan process generally consists of:
- Obtaining your Certificate of Eligibility
- Finding the home you wish to purchase
- Submitting a VA home loan application
- Allowing time for processing and approval
- Closing the loan
According to VA Mortgage Center.com, VA loans can be secured in as little as 30 days, however, eligible borrowers should allow at least 60 days for the transaction to complete.
Am I Eligible for a VA Loan?
If you are military member, there is a good chance that you are eligible to receive a VA home loan. The VA home loan program was designed to provide easy access to affordable home financing, and because of that mission has some of the most lenient eligibility requirements of any other lending program. To initially qualify for a VA home loan, all military members have to do is submit their Certificate of Eligibility and meet one of the following service requirements:
- Have served at least 3 months on active duty during war time
- Have served 181 days on active duty during a time without conflict
- Have served 6 years in the military Reserves or National Guard
The VA home loan program does not have any income or credit requirements; however, most VA-approved lenders will expect potential borrowers to have a credit score of at lease 620 for loan approval. Even if military members do not meet credit requirements, they are still encouraged to apply for a VA home loan as even those with a history of bankruptcy or foreclosure have still been approved.
borrowers, buying, home buyer, Matt Polsky, Military, Mortgage, R.H. Thackston & Company, real estate, REALTORs, selling, VA, VA Home Loan, VAMortgagecenter.com, Vermont, Veterans Administration
By Dick Thackston
Bankruptcy doesn’t generate much real estate business from people who file who don’t want their properties anymore because they’ve already let them go to foreclosure.
In 2005 Congress significantly changed the Bankruptcy Code. Means tests were added for Chapter 7 filings as well as any number of other dramatic changes intended to make it harder for individuals to file for bankruptcy. In part this lead to the increased level of consumer lending both on credit cards and against housing. The operative assumption on the lenders side was that individuals and families would not want to loose their homes, that home values would always go up and that consumers for the most part would not be able to dispose of credit card debit in Bankruptcy due to the means test. That’s not how things have worked out.
Enter the “Great Recession” and the fickle and rational nature of the modern American Consumer.
The first action the Great American consumer took was to run up their Home Equity Lines and subsidize their credit cards with these monies. Credit cards became such a mainstay of American thinking in the last ten years that life without these seemed un-imaginable. Credit Cards became more important than homes. As the market tightened Americans started trying to sell their homes in a declining market so they could pay their credit cards off or keep them current and when that stopped working, to the astonishment of more or less everybody, Americans stopped making mortgage payments but kept their credit card debt current so “we can still use our cards to buy stuff”.
The next part of the process went like this: stop paying your mortgage, apply for government aid and stall off foreclosure for many times as much as a year, then try for a short sale, short sale fails, let the house go to foreclosure, stay in the house, wait for bank to pay you to leave, just before they throw you out file for bankruptcy and extend the time frame for several more months, leave with no obligations to anyone for mortgage or credit cards. Keep car, move to new city, start over again.
American consumer, bankruptcy, bankruptcy code., buying, Chapter 11 Bankruptcy, Chapter 7 Bankruptcy, congress, credit card, credit debt, foreclosure, government aid, Great Recession, home equity, lenders, Market, modern American, Mortgage, real estate, realtor, realty, recession, selling, short sale, stall foreclosure
By Dick Thackston
I’ve gotten a consistent stream of questions from buyers about buying real estate out of Bankruptcy Court and the reality is there aren’t a great number of these, in fact they are quite rare. There are a couple of reasons bankruptcies don’t generate much in the way of real estate sales: most people who want to keep their homes don’t loose them in bankruptcies and people who don’t want their homes let them go to foreclosure before bankruptcy.
People who want to keep their homes can and often do use the Bankruptcy Court to stop a foreclosure. Filing for Bankruptcy is done electronically and can be done right up to the last minute by a competent Bankruptcy Attorney and “stop the clock” so to speak. I also emphasize “competent Bankruptcy Attorney” because going to Bankruptcy Court is a highly specialized field and I have seen many people use attorney’s who are not familiar or do not do normally practice in this field make a mess of people’s filings and needlessly loose assets.
There are two basic kinds of Bankruptcy: Chapter 7 total liquidation of debit and Chapter 11 reorganization of debt; in either case a homestead and many other types of real estate can be retained. New Hampshire has a fairly reasonable homestead deduction $75,000 per person, so a couple can have up to $150,000 in equity in their home and not be forced to sell. More often than not over the last several years people have had little or no equity in their homes so families that want to keep their home can continue to make their payments and dispose of most other non-secured debt in a Bankruptcy filing of either kind and not loose their home.
There are a couple of other situations regarding Bankruptcy and real estate that are worth considering as well non-homestead property would not be subject to homestead protection and non-reaffirmation of debt after discharge. In the case where an individual completing a Bankruptcy owns a property but owes more or almost as much as it may be worth it may be possible to retain the property, as long as the loan remains or can be made current, simple because there is no economic incentive for any other creditor to pursue taking his property – there’s literally no money in it. The idea of re-affirmation of debt means that in the Bankruptcy a property owner tells the lender on his property he will re-affirm his personal guarantee of the original loan. While this may be noble it may not actually be required by the lender, it will have minimal if any positive impact on the post Bankruptcy credit score and can create a real problem in the person who filed later wants or needs to sell the subject property and still has no equity. I had a customer who had owned his own business and filled a Chapter 7 Bankruptcy after his building business fell apart when the “Great Recession” started a few years ago and he had two mortgages on his house. When he obtained employment outside our area and had to sell his home as a short sale he found that he had not reaffirmed his first mortgage and the readily wrote off $100,000 however his second mortgage of $20,000 which he had reaffirmed wouldn’t take a dime off and he had to pay the whole amount off.
bankruptcy, bankruptcy attorney, buying, Chapter 11 Bankruptcy, Chapter 7 Bankruptcy, foreclosure, homestead, homestead rights, non-homestead, property, reaffirmation, real estate, realtor, realty, recession, selling
By Dick Thackston CRB, ABRM, ABR
Everybody’s talking about “all the foreclosures” on the market; we even see infomercials that talk about buying government and bank owned homes for as little as $500 so you find yourself thinking “Hey that could be cool! How do I get in on that action, I’ve got $500?”
First let me say: “Wake up Dorothy you’re not in OZ.”
I’ve sold real estate since 1982, I’ve been licensed in multiple states for years and I have yet to see a house sell for $500. You are not the one in 300 Million that gets a house for free.
Now that we’ve covered that let’s get to work on what really happens. To get involved in the REO Business, (Bank/Lender owned homes), you need a number of things: a strong stomach; high risk tolerance; spare cash; a good loan officer; a good lawyer and an excellent REALTOR. The first three you have to bring to the transaction yourself. An excellent REALTOR will know a good loan officer and a good lawyer that can help you get your deal done they way you want.
There is no single source of information on REO properties. Lenders all have different business models for disposing of these assets however 99% wind-up in the MLS. Some agents/agencies deal in larger numbers of these than others but almost all agencies deal in some.
The most successful way to begin the process is to find an Excellent REALTOR you know understands the process. Going from agent to agent and office to office is likely to produce poor results for you, not to say you shouldn’t switch agents if you feel whoever your dealing with isn’t into REO’s – some agents and agencies aren’t – but keep in mind most agents who ARE into REO’s have a regular list of customers and clients that they can and do make aware of excellent opportunities when they come on the market whether they are that agent’s or someone else’s listing. Excellent REALTORS tend to be loyal to their good customers and try and make sure that they keep an eye open for opportunities.
Trying to buy REO properties as a first-time home buyer with no money down and no real experience in ownership can and often does work but you will need to listen carefully to what your Excellent REALTOR tells you about the pitfalls of such a transaction and what information your loan officer will need to get the transaction to closing. There are undeniably excellent loan programs out there to make such dreams a reality but you need to make sure you’ve reviewed what your long and short term goals and abilities are with your Excellent REALTOR so you are all on the same page.
Buying REO’s is all about reality and all about having focused goals – remember you don’t want to be included in the next wave of foreclosures.
agency, agent, bank owned, buying, cash, clients, closing, customers, foreclosures, government owned, high risk, lawyer, listings, Loan, realtor, REO, selling, tolerance, transaction.
